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Post by mhbruin on Jan 7, 2024 7:46:09 GMT -8
It's a Great Club, But We Can't Afford to JoinAmericans worth more than $100 million sat on a whopping $8.5 trillion in untaxed profits in 2022, a report released Wednesday found — money that may never be taxed unless Congress closes a loophole shielding the investments of the ultrarich. These centimillionaires and billionaires made up just 0.05% of all American households in 2022, according to Federal Reserve data analyzed by the progressive nonprofit Americans for Tax Fairness. But they held one-sixth of so-called unrealized capital gains in the country. Unrealized gains are the primary source of income for many elite families. Under current law, growth in the value of assets like stocks, bonds, investments, real estate or businesses is not taxable until they are “realized,” or sold. The ultrawealthy can nonetheless live off these gains by taking out low-interest loans against their exorbitant wealth. And when their fortunes become inheritances, the gains are no longer taxable. “The superrich truly live in a strange and privileged world,” said David Kass, the executive director of Americans for Tax Fairness. While most households depend on paychecks — “income that is taxed all year, every year,” Kass noted — these untaxed gains make up the largest single source of income for the ultrawealthy. “The scandal of tax-free billionaires,” Kass added, also results in billions of dollars less in tax revenue that could fund health care, housing, education and other public programs. Led by President Joe Biden, Sen. Ron Wyden (D-Ore.) and Reps. Steve Cohen (D-Tenn.) and Don Beyer (D-Va.) have introduced a “Billionaires Income Tax” in both chambers of Congress. The tax would apply only to unrealized gains held by ultrawealthy households, and could generate an estimated $500 billion in new revenue over a decade. Michael, Help me out here. If you borrow money using an asset as collateral, you still have to pay back principal and interest in accordance with the terms of the loan. So, it must be more complicated than your explanation? I have never been in that club, so I don't know what kind of low interest loans are offered to the ultra rich. I know there are special departments in banks and other investment companies that cater to the wealthy, and they are offered services that you and I don't know about. I imagie they have investments like stocks that pay dividends (which are taxed at a lower rate), real estate that earns rental or other income that is offset by depreciation, oil wells that benefit from the oil depletion allowance, etc. I am sure they know how to use the carried interest deductoin. You might check this out: The Secret IRS Files: Trove of Never-Before-Seen Records Reveal How the Wealthiest Avoid Income Tax
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Post by mhbruin on Jan 7, 2024 9:28:25 GMT -8
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From that ProPublic story:
In that year, Bezos, who filed his taxes jointly with his then-wife, MacKenzie Scott, reported a paltry (for him) $46 million in income, largely from interest and dividend payments on outside investments. He was able to offset every penny he earned with losses from side investments and various deductions, like interest expenses on debts and the vague catchall category of “other expenses.”
In 2011, a year in which his wealth held roughly steady at $18 billion, Bezos filed a tax return reporting he lost money — his income that year was more than offset by investment losses. What’s more, because, according to the tax law, he made so little, he even claimed and received a $4,000 tax credit for his children.
His tax avoidance is even more striking if you examine 2006 to 2018, a period for which ProPublica has complete data. Bezos’ wealth increased by $127 billion, according to Forbes, but he reported a total of $6.5 billion in income. The $1.4 billion he paid in personal federal taxes is a massive number — yet it amounts to a 1.1% true tax rate on the rise in his fortune. --------------------- This isn't what you asked about, but I think some liberal angst about unrealized capital gains is wrong.
Personally, when a stock I own goes up, I don't see that as making money. I see that as a number on paper that goes up and down, but is not money safely in my pocket.
In 2011 I bought some Ely Lilly stock for $35 per share because it paid a good dividend. I got lucky. It now lists at almost $619 per share. On paper I have made a lot of money, but if I sell it I will pay a big tax bill. As I really richer? I guess. They have more than doubled their dividend, so my income has gone up and I haven't paid tax on my unreaized capital gains.
It's kind of like the issue that led to Proposition 13 in California. People found the value of their houses when up dramtically, so they had big increases in property tax. Since they were living in the same house, they didn't get any immediate financial benefit, but they still had to some up with the money to pay thousands more in taxes. In essence we taxe them for an unrealized capital gain, and it created a financial crisis for middle-class famiies.
I am sure lots of poor people who didn't own homes would have loved to have had the problem, but it still was a problem. And it gave us Howard Jarvis who was financed by the Koch Brothers.
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Post by sagobob on Jan 7, 2024 12:31:37 GMT -8
Michael, Help me out here. If you borrow money using an asset as collateral, you still have to pay back principal and interest in accordance with the terms of the loan. So, it must be more complicated than your explanation? I have never been in that club, so I don't know what kind of low interest loans are offered to the ultra rich. I know there are special departments in banks and other investment companies that cater to the wealthy, and they are offered services that you and I don't know about. I imagie they have investments like stocks that pay dividends (which are taxed at a lower rate), real estate that earns rental or other income that is offset by depreciation, oil wells that benefit from the oil depletion allowance, etc. I am sure they know how to use the carried interest deductoin. You might check this out: The Secret IRS Files: Trove of Never-Before-Seen Records Reveal How the Wealthiest Avoid Income TaxThanks for the response and the link. I read the article and without a Tax Accountant ready with some explanations, not a lot made much sense. The main take away is that as a percentage of income, those favored few are not paying a fair share.
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